Imperial Forces

Expanding Via Franchising

Once your systems are in place, franchising may be your best bet for expanding nationwide quickly. When you franchise, you sell your concept, operations, products and marketing strategy to other entrepreneurs who contract with you to open new locations, operate them according to your system and pay you a percentage of their sales. Because the capital for expansion comes from your franchisees rather than loans or other sources, your business can grow larger much faster than it otherwise could. Before jumping into franchising, however, you need to make sure both your personality and your business concept are suited for this way of doing business.

Running a franchised business is very different than running one or even multiple locations. Instead of being hands-on in your store or office, you'll take on a more corporate role. And rather than selling your product or service to end-users, your job will be selling potential franchisees on the profit potential of your concept.

How do you know whether your franchise concept will work? There are several questions to ask yourself:

  1. Can the quality of the product or service be easily maintained across multiple locations? One of the big draws of a franchise system is that customers know they'll get the same quality at any location they visit.
  2. Is the concept teachable? Successful franchises are based on a structured system, with operations manuals and standardized procedures. If the success of your business is largely due to your own personality and presence, or if all the knowledge needed to run the business is locked up in your head, you're not ready to franchise.
  3. Is the concept replicable? Can it be repeated in many locations nationwide? If your company gives river-rafting tours, it isn't likely to be a good franchising candidate, because its potential is limited by geography.
  4. Will potential franchisees find your concept appealing? Before franchisees can sell your products or services, you have to sell them your idea. Spark their imaginations by offering an innovative edge, such as a new type of fast food or a new way to provide a service.

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This article was originally published in the March 2002 print edition of Entrepreneur with the headline: Imperial Forces.

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